Small Businesses

Oral Answers to Questions — Prime Minister – in the House of Commons at 12:31 pm on 22nd October 2008.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury 12:31 pm, 22nd October 2008

With permission, Mr. Speaker, I shall now make a statement on the latest Government measures to help small businesses. The Government understand that many small firms are having real difficulties as a result of the credit crunch and worldwide economic slowdown. Those companies are critical to our long-term economic success. More than 99 per cent. of UK businesses are small and medium-sized enterprises. They contribute as much as large businesses to UK output, and nearly 60 per cent. of private sector jobs.

We have always made getting the business environment right for SMEs a priority, and since 1997, 1 million more small businesses have been created. UK SMEs employ 1.5 million more people; they are more productive and more innovative, and they survive longer. Most recently, our enterprise strategy set out our renewed vision to make the UK the world's most enterprising economy and the best place to grow and start a business. We increased the small firms loan guarantee lending allocations by 20 per cent. for 2008, boosted enterprise programmes and committed to a new approach that avoids placing unnecessary regulatory burdens on smaller firms.

These tough times have only made us more determined to help SMEs. We need to be practical and innovative; above all, we need to ensure that what we do makes a real difference. We are meeting business organisations and businesses across the country to discuss the problems that they are facing, such as cash flow, access to finance and higher bank charges and costs, and to ensure that their views are reflected in Government action.

Our first priority has been restoring financial stability. Without a strong financial system, small businesses cannot access the credit that they need, home owners struggle with their mortgages, and trade in the high street slows down. But as the impact of the global financial squeeze hits small businesses further, the Government believe that it is not enough for us to focus on financial stability alone. So, building on the measures that we have already brought forward, the Government announced yesterday further action, with immediate effect, to help SMEs through these tougher times.

For SMEs, cash dominates: cash in—prompt payment—and cash out, to their work force, for inputs and to the Revenue. Over the past year, the time that organisations take to pay their bills to suppliers has increased, intensifying the cash-flow pressures of many businesses. The Government are determined to do everything they can to help. The Government will aim to pay their suppliers as soon as possible, and within 10 days at the latest. That will bring forward billions of pounds-worth of payments, on top of the majority of payments already made within 10 days. The regional development agencies, which spend around £750 million annually with suppliers, have also committed to that. Yesterday, my right hon. Friend the Secretary of State for Communities and Local Government wrote to the Local Government Association, and the chief executive of the national health service wrote to NHS trusts, asking those public bodies to review their payment performance and to follow the Government's lead.

I recognise the essential role that the approach of Her Majesty's Revenue and Customs to business tax compliance can play in managing the economic downturn. HMRC already has a policy of flexibility in dealing with struggling businesses, and I know that the Treasury will continue to impress upon it the importance of implementing and publicising that policy in the current climate. We are also working with the Institute of Credit Management and all leading finance and business organisations to promote prompt payment and ensure that businesses have the best advice and guidance on managing cash flow.

The Government's measures of financial support to the banking industry are designed to stabilise UK banks and support the long-term strength of the economy, which helps small businesses. As part of the recapitalisation package, Royal Bank of Scotland, HBOS and Lloyds TSB committed to

"maintain the availability and active marketing of competitively priced lending to SMEs at a level at least equivalent to that of 2007".

Small businesses must know that the banks are open for business. RBS, HBOS and Lloyds TSB make up 50 per cent. of small business lending, but given that they operate in a competitive environment, we can expect other banks to follow suit. The Government will monitor how recapitalised banks are delivering their commitment on SME lending. We will ask the banks how they will achieve that, including the availability of capital and liquidity allocated for small businesses, marketing plans, and their principles for SME lending, from head office to branch level.

We want to see banks taking appropriate risk assessments on SME lending—being responsible but not unduly risk-averse, and not passing on unreasonable costs. The Chancellor and my right hon. Friend the Secretary of State for Business, Enterprise and Regulatory Reform will be meeting all the banks and building societies tomorrow to discuss those issues, and what small businesses can expect from them.

The Government have also been brokering contact between UK banks and the European Investment Bank. The four largest UK banks have now signalled their initial interest in negotiating loans totalling about £1 billion from the EIB to lend to UK SMEs. I hope that we will be able to make rapid progress on that for small businesses.

It is critical at this difficult time that businesses have access to support and advice that helps them to survive now and succeed in the future. Business Link advisers will provide a free health check for every small business, whatever its size, sector or location, and other advice on how to adapt to changing economic conditions and be ready for the economic upturn.

My right hon. Friend the Secretary of State for Innovation, Universities and Skills yesterday announced that small businesses are the focus of £350 million of Government funds to help them get through the tougher economic climate by building the skills and expertise of their workers. The Government are making improvements to Train to Gain that will deliver advice and funding for training, with the minimum bureaucracy and delay. For the first time, training at level 2 will be free for all SME employees regardless of whether they already have qualifications at that level, and there will be free bite-size courses in business-critical areas, including business improvement techniques and customer service, to raise productivity. Management and leadership training will also be opened up to the smallest employers so that it is now available to employers with five to 250 employees.

Small businesses drive our economy forward, and during this global economic downturn, the Government are determined to give the millions of people who run and work for SMEs the chance to maintain their livelihood and prepare for better times in the future. That is why we have brought forward these measures, and we will continue to do all we can through the work of the National Economic Council to look for and implement solutions that help SMEs. I commend this statement to the House.

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Photo of Alan Duncan Alan Duncan Shadow Secretary of State

The Minister's statement is an unprecedented occasion, representing an unacceptable mixture of farce and contempt. The Department has no one of Cabinet rank in this House, so instead, a Minister has just read out a statement that the real Secretary of State will deliver in another place in three hours' time.

Last week the Leader of the House said that there would be no statement delivered today, but then today's announcements were made first in a Select Committee, then in a press release sent out by the Department yesterday lunchtime, and then in a press conference attended by the Secretary of State and the Prime Minister. If the real Secretary of State says something in the House of Lords that the Minister has not said here, will we be entitled to a further statement tomorrow?

The Government have been slow to cotton on to the fact that the turmoil witnessed over the past few months in financial markets is now causing the deepest imaginable pain for businesses both big and small throughout the country. Is there not a danger that even the most imaginative measures to assist business cash flow will simply be too small and puny to cope with the scale of the fallout caused by a decade of Government mismanagement and financial hubris?

We have been ahead of the Government in sounding the alarm about the debt that has been built up, the taxes that have been raised and the irresponsible financial practices at the heart of Government. We want to see some immediate practical assistance for small businesses, which are having to deal with serious cash-flow problems: prompt payment from central and local government, deferral of VAT, a cut in national insurance, a reduction in corporation tax for small business, and more promotion of the small business rate relief, to which many are entitled but for which not all apply.

Will the Minister therefore confirm that the £350 million that was announced yesterday, and repeated today, to help SMEs train staff is, in fact, just a reheat of old money and a recycling of old schemes? How, indeed, can the Government possibly monitor prompt payment by Government and Government agencies, when they have admitted in a parliamentary answer that they never even record that information?

On what basis can the Minister defend the assertion made by the Secretary of State for Innovation, Universities and Skills on the "Today" programme, and repeated today, that bank lending will continue at 2007 levels? How will the Minister measure that? Is it not the case that all over the country, contrary to the Government's assertions, overdraft facilities are being viciously called in by the banks, to the severe detriment of thousands of businesses? Is it not blatantly evident that banks are not continuing to lend as the Government say they are and must, but are in fact pulling the rug from under many perfectly good firms?

To whom can business turn for a reprieve, when a bank declares that it will withdraw an overdraft facility or suddenly call in guarantees? What is the Minister's estimate of the number of businesses that will go to the wall in the coming year? Does he agree with some independent economic experts that unemployment will shoot through the 3 million mark by the end of next year? Is it not the case that although the base rate is falling, actual borrowing costs are rising through 15 per cent.?

The Minister mentioned the small firms loan guarantee scheme, but what plans do the Government have to extend this very narrow scheme to help businesses more widely? How, indeed, can they claim that regional development agencies will make a difference when the Government have just raided their budget to prop up the housing market?

Does the Minister share my analysis that there is growing anger that a Prime Minister who has spent the last years declaring that he has abolished boom and bust, while in fact storing up all the trouble that is now hitting us hard, is massively to blame for mortgaging this country just as bankers have mortgaged their banks? While demanding praise for building what he has not yet even paid for, he has delivered only the illusion of prosperity, behind which will now follow massive bills for future generations to pay. Having built the country on a mountain of debt, the Labour Government are now as bankrupt as the economy that they have created. Does that not prove the abiding truth of post-war British politics—that Labour Governments always run out of money?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

I start by thanking the hon. Gentleman for his courteous welcome to me at the Dispatch Box.

What we are doing as a Government is concentrating on the real work of helping small businesses through difficult economic times. I would have liked to think that he would welcome the package of measures that we are announcing today. He mentioned small business rate relief, so may I remind him that the Opposition voted against the Bill introducing it?

Let me address the questions that the hon. Gentleman posed, first about the £350 million announced by the Department for Innovation, Universities and Skills. That focuses on SMEs as a top priority and relaxes the rules on spending on training to gain. I should have thought that that would be widely welcomed at a time when companies are thinking about shedding staff and about whether to move to short-time working. I should have thought that the ability to say, "You can work four days a week and you can train for one, so you will have additional skills", would be warmly welcomed during these difficult economic times. I am surprised that the Opposition do not seem to accept that.

On the subject of prompt payment, the hon. Gentleman should be aware that Government Departments report annually on their progress in meeting payment targets. Yes, it is an ambitious target that Departments pay within 10 days—although I think that the majority of payments are already made within 10 days. If we can get this right, it could be a big boost to help small companies, but we are paying with taxpayers' money and we need to make sure, when we are safeguarding the public purse, that the goods and services have been delivered and the invoice is right. We will then do everything we can to ensure that it is paid within 10 days.

Let me repeat the point about bank lending. We are not saying that there should be lending at 2007 levels; we are saying that the availability of that funding should be at 2007 levels, and that we expect banks to market actively and to offer competitively priced products to the SME sector.

There is clearly an issue in relation to rates. There is a great deal of anecdotal evidence out there suggesting that some banks are starting to look again at their lending practices and are insisting on higher margins. Although we cannot interfere in individual lending decisions and it would be wrong to do so, it is right that we should expect banks to be clear about their lending principles. That will be one of the subjects for discussion when my right hon. Friend the Secretary of State for Business, Enterprise and Regulatory Reform and the Chancellor meet the banks tomorrow.

There was an accusation from the Opposition that we have been too slow in taking action. In March we announced that we would increase the small firms loan guarantee scheme by 20 per cent., because we understood that companies were going through difficult times and would need extra support. We are making such decisions. I heard Alan Duncan argue last night in the debate that there should be lower spending. I do not see how, in our current difficult economic times, low spending will help the SMEs that he professes to want to support. That is bad economics, and he should be ashamed of himself.

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Photo of David Clelland David Clelland Labour, Tyne Bridge

The Chancellor of the Exchequer is considering bringing forward capital works in order to stimulate the economy in the face of the economic downturn. Is the Minister aware that improvements to the major road network and local rail services in the north-east, which are currently outside the scope of regional funding allocations, would be of major benefit to small businesses in the north-east, which have been calling for such improvements for some time? Will my hon. Friend draw to the attention of the Chancellor of the Exchequer the opportunity that the proposal presents for helping small businesses in the north-east of England?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

My hon. Friend is right to point out that a number of worthwhile infrastructure projects could be brought forward to provide strong economic benefits while at the same time helping small businesses during difficult economic times. We are actively looking at such possibilities. Our policy contrasts very sharply indeed with that of Conservative Members, who do not want to borrow, think we are wrong and think we should be spending less. That would damage our economy, so it is not the right or responsible thing to do.

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Photo of John Thurso John Thurso Shadow Secretary of State for Business, Innovation and Skills, Liberal Democrat Spokesperson (Business, Innovation and Skills)

I am grateful to the Minister for having sent me a copy of his statement in advance—although there is not much new in it. The hon. Gentleman is right to draw attention to the importance of small businesses, which are the bedrock of commerce in many parts of the country and vital for our long-term economic growth. The key issue facing small businesses is cash flow and, more particularly, the availability of bank finance. Will he explain how the Government will ensure that the banks negotiating for refinancing will actually deliver on the sentiment? The sentiment in favour of maintaining availability is fine and laudable, but how will the Government ensure that that is what happens? May I suggest that a memorandum of understanding be agreed between the Government and the banks, which specifically deals with the question of rates, fees and availability? That should be agreed in principle in advance.

On payments to small companies, I welcome the move to oblige public sector bodies to pay up quickly, and within 10 days, if possible. Again, however, how will the Minister ensure that that actually happens, given that most of those bodies have computerised payment systems that operate on a monthly basis?

How will the Minister ensure that HMRC will be more flexible, particularly when the work force change programme is taking 10,000 skilled people out of HMRC and replacing them with a call centre operation? And what can he do to ensure that private companies, too, pay more quickly? Will he talk to the CBI about how it could talk to its members about that?

The Minister mentioned the small firms loan guarantee scheme. Is he aware that its annual report, published in August this year, noted a further decline in the number of loans given—notwithstanding the new money. Total loans now stand at £270 million, but default rates are about 13 per cent., and the biggest complaint from small businesses is about the administrative burden of getting into the scheme. The best way to make that scheme work is to improve the administration, so what action is the Minister taking to get the administration right?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

I thank the hon. Gentleman for his comments, particularly his welcome for the Government's attempt to ensure prompt payments. Yes, there are administrative difficulties in carrying out some of these measures, but there is a clear commitment from the top to do that. We need to ensure that the system continues to deliver. As I said, a significant majority of payments are already being made within 10 days, but we need to consider how to raise that performance; it is a question of managing for better performance. Yes, we also want to encourage large private companies to pay their suppliers more promptly, and I have no doubt that we will want to discuss the matter with them.

The hon. Gentleman asked about HMRC. We have said that we want it to look into how it can operate more flexibly during these difficult economic times, and I have no reason to believe other than that it will want to do just that.

The hon. Gentleman also asked about another matter that I mentioned in my statement—about how we can reach agreements with the individual banks that are taking advantage of the recapitalisation fund to ensure that they continue to lend to small businesses. We do want to monitor that closely; we will be in discussion with the banks about it and we have been very clear that we want them to continue marketing actively. We want to talk to them about ensuring that they make competitive rates available. As I said, it is not for the Government to make individual lending decisions, but we need to understand the principles by which they operate. That is the right thing to do.

Lastly, the hon. Gentleman mentioned the small firms loan guarantee scheme. We always want to see whether we can make that administratively simpler, so I shall take his comments into account. We also want to ensure that the scheme is actively marketed to SMEs by the banks, which have not always done as much as they should have. I hope that we will see significant change over the coming months.

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Photo of David Hamilton David Hamilton Labour, Midlothian

On Monday, I met the chamber of commerce chief executive, who is also chief executive of the enterprise trust, and it became apparent to us that although we wanted to achieve things through HMRC, and, indeed, the Treasury, it is the Scottish Administration who have the power. Will the Minister agree to meet me, and a number of other Scottish MPs, to discuss how we can overcome that problem, because it is imperative that the changes are implemented in Scotland as quickly as possible?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

As the House will be aware, enterprise policy is a devolved matter, so today's statement applies only to England. However, I would be happy to meet my hon. Friend to discuss these issues further, because supporting small businesses is important to this Government, wherever those small businesses are located.

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Photo of Peter Luff Peter Luff Chair, Business and Enterprise Committee, Chair, Business and Enterprise Committee

I intend no criticism of the Minister, who is an able and decent man, when I say that he has said nothing to this House today that his noble Friend the Secretary of State did not tell the Select Committee that I chair at yesterday's sitting. That raises important questions about the accountability of the Department for Business, Enterprise and Regulatory Reform to this House, but those are questions for another day.

Let me press the Minister on one issue that we also raised with the Secretary of State yesterday—the question of business rates, particularly void rates. Small businesses face a huge burden when they cannot let property in the current commercial downturn. That urgently needs to be relieved, and the Government should also drop their plans for business rate supplements, which pose another huge challenge to the cash flow and finances of businesses in very difficult times.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

I acknowledge the hon. Gentleman's points. As Chair of the Select Committee on Business, Enterprise and Regulatory Reform, he speaks with considerable experience. I believe that the package is an important one, which will be welcomed by business because it offers practical measures that will make a difference, but it should not be seen as the last word on Government support. It builds on the already impressive programme of business support that we, as a Government, have provided. Over the coming months, we will be looking to see what more we can do to help businesses through these very difficult economic times.

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Photo of Eddie McGrady Eddie McGrady Social Democratic and Labour Party, South Down

I welcome the Minister's statement and his commitment to SMEs, on which the economy and community of Northern Ireland are very dependent. On the policy of flexibility for HMRC, will he give further indication of what that means, so that we can interpret it on the ground and help our constituents to avail themselves of that opportunity?

I endorse the point in the previous question about the rates on vacant properties. Apart from the spectre of vacancies, we now have genuine vacancies brought about by the economic recession. As the Minister is probably aware, transport, gas and electricity costs in Northern Ireland are far above the UK average, so will he provide some help through equalisation or rationalisation?

Lastly, I would like to ask the Minister, even though he has no jurisdiction in the matter, whether he is aware that the failure of the Executive to meet in Northern Ireland has frustrated the issue of Government contracts for public utilities and public works, so could either he, if he has personal knowledge, or, if not, his right hon. Friend the Prime Minister, encourage the Executive—

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Photo of Michael Martin Michael Martin Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission

Order. I am always interested to hear the hon. Gentleman's questions, and I am, as he knows, very fond of Northern Ireland. Perhaps one day, however, I will get just one supplementary question from him.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

My hon. Friend raises a number of points, most of which are the responsibility of the Northern Ireland Administration and their Department of Enterprise, Trade and Investment. I cannot reply to those questions, but in response to his question about his desire for HMRC to show more flexibility, I can be pretty clear. We do not want HMRC to be first in the queue to put companies into bankruptcy in order to get their money. We want it to be flexible, to recognise companies that are in difficulty and to discuss issues with them on a case-by-case basis—and I hope that that is what HMRC will do.

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Photo of Brian Binley Brian Binley Conservative, Northampton South

The Minister says that the Government are keen to do all that they can to help small business, yet this year they are increasing capital gains tax by £300 million and small business corporation tax by £370 million, and charging £900 million on empty properties. Will the Minister now tell us that those increases will not be implemented and that he will change the rating arrangements to provide relief—or are his words fine, but not very meaningful?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

What I can tell the hon. Gentleman is that, in my view, the measures we have announced can help to make a real difference and are attuned to the difficult times that we face. I am sure he will welcome the entrepreneurs' relief on the first £1 million of capital gains, and also the effective tax rate of 17.2 per cent. on a £10 million capital gain. I do not think that 17.2 per cent. on a £10 million capital gain is an unreasonable price to pay.

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Photo of Paddy Tipping Paddy Tipping Labour, Sherwood

Small businesses are vital to the health of the rural economy. Will the Minister continue to work to ensure that high-quality broadband services are available even in the least populated areas?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

My hon. Friend is a doughty champion of rural areas, and he is right to raise the issue of broadband connectivity. We want to ensure that broadband is available in rural as well as in urban areas, and we have been very good at achieving the targets that we have set for broadband access, but there is more that we can do. I should be more than happy to discuss the issues with my hon. Friend, and also to put him in touch with Lord Carter, who has direct responsibility for them.

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Photo of Adam Price Adam Price Spokesperson (Communities and Local Government; Culture, Media and Sport; Defence; Transport; Ministry of Justice)

The Minister says that he expects the rest of the banking sector to follow the lead of the recapitalised banks—HBOS and the rest—in reopening lines of credit. I wish that I shared his faith in market mechanisms after all that has happened over the past few weeks. Surely a better approach would be to insist that all banks—not just those that participated in the recapitalisation scheme, but those that availed themselves of the £250 billion of Government guarantee for new debt—agreed to lend responsibly to small businesses.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

We all want to see responsible lending, but, as I said earlier, the banks that have taken advantage of the recapitalisation currently constitute more than 50 per cent. of the market. There is still a competitive market out there when it comes to loan finance, and our priority must be to ensure that competitive products are available to SMEs.

I do not share the hon. Gentleman's fear that banks that do not take advantage of the recapitalisation scheme will still not want to lend to good SMEs. What we must do is ensure that the many excellent companies that we have in the United Kingdom still have access to finance when they require it, on reasonable and acceptable terms, so that they can invest for the future.

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Photo of Harry Cohen Harry Cohen Labour, Leyton and Wanstead

The Prime Minister has said that, at the European summit, he put pressure on the European Investment Bank to release millions of pounds for small businesses in this country. How will that money filter through to small businesses in, for example, Leyton and Wanstead?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

As I said earlier, the banks have expressed an initial interest in making £1 billion available to small and medium-sized businesses through the European Investment Bank. That has not yet been completely sorted out, but it is potentially a significant package which, if we can get it right, will benefit companies in areas all over the country, including my hon. Friend's constituency.

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Photo of Gregory Campbell Gregory Campbell Shadow Minister (Work and Pensions)

The Minister has outlined a number of measures which we hope will go some small way towards assisting small businesses, although we must wait to assess their efficacy. He said that banks should not pass on unreasonable costs. Given the recapitalisation that was mentioned a few moments ago, what steps will the Government take to ensure that small businesses do not face the unreasonably high costs that have faced them heretofore?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

I also said earlier that conditions had been applied to the banks involved in the recapitalisation scheme in regard to lending to small businesses, and also in regard to the provision of mortgages. We will continue to engage in a dialogue with the banks and monitor their actions, to ensure that companies are given fair access to loans at competitive prices.

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Photo of Nigel Griffiths Nigel Griffiths Labour, Edinburgh South

Will my hon. Friend avoid returning to the woeful Conservative record on small businesses, which experienced a doubling of VAT, the imposition of a tax of more than 30 per cent., and a 25 per cent. interest rate which crippled them? Will he also ensure that the banks' stampede to withdraw credit facilities and claw back their loans is halted, that the process is properly monitored, and that, at the appropriate time, the effectiveness of that action is reported to the House?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

My hon. Friend is right to point out that the Opposition have form in this regard. The fact that they have wanted greater financial deregulation, the fact that they did not support us on Northern Rock and Bradford & Bingley, and the fact that they seem to have completely lost faith with the City of London give great cause for concern about whether they are acting as a responsible Opposition.

As I said earlier, during this difficult economic time we want to ensure that banks lend responsibly, but also to ensure that they do not profiteer and try to restore their balance sheets at the expense of good British businesses. That is something that not just the Government but, I am sure, the whole business community will want to watch very closely.

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Photo of John Baron John Baron Opposition Whip (Commons)

May I return the Minister to the issue of small business rate relief? Many businesses across south Essex are eligible for the relief, but do not access it because of the paperwork and bureaucracy involved. Why will the Government not make it automatic?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

I understand that there is a two-page form for the claiming of small business rate relief, and that it needs to be filled up only once every five years. It has been suggested that it might be possible to automate the relief, and we will consider that possibility, but I do not think it is as difficult to apply for it at present as the hon. Gentleman seems to suggest.

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Photo of Anne Snelgrove Anne Snelgrove Labour, South Swindon

Last year, Swindon and Bristol jointly topped the league for the biggest growth in the number of small businesses. I welcome the announcement of practical measures to help our SMEs in the south-west, but what can my hon. Friend do to encourage more local councils to put business their way, and to persuade councils to follow central Government's lead in respect of payment within 10 days?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

My hon. Friend has made some good points. We certainly want to encourage local authorities to pay promptly, and a number of them already do. During these difficult times, however, we should consider how we can use public money most effectively to support our small businesses. As my hon. Friend says, Swindon and Bristol contain many very successful small businesses, and over the years I have visited a number of them.

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Photo of Rob Wilson Rob Wilson Shadow Minister (Education)

I, too, congratulate the Minister on his new post. Does he agree that SMEs need proper and detailed macro-economic as well as micro-economic information? Will he confirm two facts: first, that we are now entering a recession, and secondly that we have not seen an end to boom and bust in the economic cycle?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

I thank the hon. Gentleman for his opening remarks. As somebody who used to run a small business, I always wanted to understand the global competitive environment, so what he says about SMEs is right. The Government do not make it their practice to provide a running commentary on the state of the economy, but, as the hon. Gentleman is aware, Government forecasts will be updated in the pre-Budget report.

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Photo of David Kidney David Kidney PPS (Rt Hon Rosie Winterton, Minister of State), Department for Work and Pensions

The Government cannot make banks lend money to small businesses under the small firms loan guarantee, but given worrying reports of banks refusing to take any part in the scheme at the present time, can the Economic Secretary, at least for the duration of this serious global economic downturn, make the word "guarantee" refer to access to capital for those small businesses that need it?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

It is important that we have a properly effective small firms loan guarantee scheme that is actively marketed. The Government will want to make sure of that, so I hope I can give my hon. Friend the assurance he seeks.

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Photo of Robert Smith Robert Smith Shadow Deputy Leader of the House of Commons, Opposition Whip (Commons)

It is all too timely that we are recognising the real consequences for real people of this recession, with the news yesterday of the proposed closure of a paper mill in Inverurie, with the loss of 400 jobs. The recession will, therefore, hurt real people in the economy. To return to the Economic Secretary's announcement about the HMRC and its policy to adopt an understanding approach to business and the collection of tax, I understand that it is also under an incentive to maximise its revenue collection. Will the Minister therefore place in the Library the revised guidance that will go out to the HMRC putting into effect what he has announced in his statement?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

I cannot guarantee to do that at this point in time, but let me take that request away and see whether it is possible to do so. The redundancies in the hon. Gentleman's constituency are regrettable, and they reinforce that we are facing difficult times and that we need a Government who are active and decisive in taking practical measures that will help businesses.

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Photo of Alison Seabeck Alison Seabeck Labour, Plymouth, Devonport

I welcome the package my hon. Friend has announced, but he will be aware that many small businesses have earmarked for their January 2009 tax bill money that is currently invested in Icelandic banks. While they may get some of that money back under the guarantee scheme, that could take months. Is there any scope for the HMRC to defer payments in the same way as happened when the foot and mouth crisis hit us?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

The situation involving the Icelandic banks is complicated, and people's circumstances depend on whether they are creditors in an Icelandic branch that is regulated by the Icelandic authorities or in a subsidiary of an Icelandic bank that is regulated through the Financial Services Authority. I hope that we can make very quick progress in the administration of the Icelandic banks' subsidiaries in the United Kingdom. We have also been strongly pressing the Icelandic authorities for a quick and fair administration in Iceland, so I hope we can give companies with investments in those banks some early reassurance—although I do not know the scale of the problem. We will continue to do all that we can to press the Icelandic authorities to ensure that the UK creditors are treated fairly.

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Photo of Anne Main Anne Main Conservative, St Albans

For about eight to 10 days now, I have been asking the Government one simple question, and I would like to give them another bite at the cherry. Last Monday, I said there was concern among small businesses about the £300 million raid on their funding through the regional development agencies. On Monday, I was told by an official that it was a difficult decision, taken with reluctance, and that the Prime Minister and other Ministers had been involved in it. I would like to know what evaluation was made of the impact of that decision on small businesses. I asked on Monday, and got no answer. Yesterday, I asked the Minister of State, Department for Business, Enterprise and Regulatory Reform, Mr. McFadden—he is sitting next to the Economic Secretary now—and got no answer, and in my speech I requested an answer but got none, and nor was there any mention of it whatever in the summing up. I give the Economic Secretary another bite at the cherry: what evaluation was made of the impact on small businesses?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

RDAs are important economic agents in their regional and local economies, and it is right that the Government provide support to them. Of course, decisions will from time to time be taken on different matters when there are changing priorities—and I would like to think that the hon. Lady would have welcomed the housing package we announced on 2 September this year.

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Photo of Adrian Sanders Adrian Sanders Opposition Deputy Chief Whip (Commons)

The Government are right to focus on cash flow and improving credit, but what more can be done to help local authorities as, at the end of the day, it is they who are asked to give an—often discretionary—concession to small businesses, and they frequently say they do not have the funds to do that?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

The hon. Gentleman is right that cash flow is one of the first priorities for businesses during economic downturns. That is why the Government have taken the action we have taken and why getting in good, top-quality business advice is crucial. Many big businesses have a range of support available to them, but small companies often feel left on their own, and we as a Government want to say very clearly that we are on their side, and, in turn, we are providing practical advice and support to them. I believe that responsible local authorities also want to do that. Local authorities are independent in these matters, but I want to encourage them to work with Business Link and to ensure that we have a co-ordinated programme of support in local areas, as that is important.

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Photo of Henry Bellingham Henry Bellingham Shadow Minister (Justice)

Does the Economic Secretary agree that sub-post offices are among the most important family-run businesses in both urban and rural areas? Does he also agree that as many of our constituents are currently moving money into safe post office and national savings accounts, now is not the time to scrap the Post Office card account, and will he give a guarantee today that it will remain in place?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

That matter, which is clearly one for the Department for Work and Pensions, does not relate to the statement before the House. However, in answer to the hon. Gentleman, there are many small businesses in his constituency and the region that are the backbone of that local economy. It is right that this package of support is being made available to them. I hope he will welcome it, and I also hope he will appreciate that if his Front-Bench colleagues got their way and cut lending, it would not be possible to introduce such packages and small businesses in his constituency would be unable to get the support to which I think they are entitled.

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Several hon. Members:

rose —

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